Digital Transformation Is Not About Technology

In recent years, the senior executives found that digital transformation (DT) risk is their #1 concern in the last two years. Yet more than 70% of all DT initiatives do not reach their goals. Of the $1.2 trillion spent on DT the previous year (source), it was estimated that $900 billion went to waste. Why do some DT efforts succeed, and others fail?

 

Fundamentally, it’s because most digital technologies provide possibilities for efficiency gains and customer intimacy. But if people lack the right mindset to change, and the current organizational practices are flawed, DT will magnify those flaws. Five key topics have helped us lead our organizations through digital transformations that succeeded. 

 

1: Figure out your business strategy before you invest in anything. Leaders who aim to enhance organizational performance through digital technologies often have a specific tool in mind. “Our organization needs a machine learning strategy,” perhaps. But digital transformation should be guided by the broader business strategy.

At our engagement at a water utility company, we developed a two-year strategy for serving their customers. Mobile apps were just as important as the water and sewer services they provide. They chose to focus their attention on three areas: speed, innovation, and digitalization.  Specifically, the utility sought to reduce operation costs, increase the revenue stream, and improve the use of data in its organization. After concrete goals were established, the company decided on which digital tools it would adopt. Just to take speed-to-market as an example, the organization has embraced mobile design technology, and it has helped them reduce the cost of their customer experience by 50%. Further, they also helped their customers to install real-time data tracking management systems to increase operational efficiency and built an Integrated Mobile app. This digital platform integrates information from customers and technicians. The finance department took a similar approach and ultimately reduced month-end closing time by more than 30% and revamped the entire bill and collection process.

There is no single technology that will deliver “speed” or “innovation” as such. The best combination of tools for a given organization will vary from one vision to another.

2: Leverage insiders. Organizations that seek transformations (digital and otherwise) frequently bring in an army of outside consultants who tend to apply one-size-fits-all solutions in the name of “best practices.” Our approach to transforming our respective organizations is to rely instead on insiders— Customer MVP — staff who have intimate knowledge about what works and what doesn’t in their daily operations.

3: Design customer experience from the outside in. If DT’s goal is to improve customer satisfaction and intimacy, any effort must be preceded by a discovery phase with in-depth input from customers. 

Leaders often expect that implementing a single tool or app will enhance customer satisfaction on its own. However, the organizations’ experience shows that the best way to maximize customer satisfaction is to make smaller-scale changes to different tools at different service cycle points. The only way to know where to alter and how to alter is through obtaining extensive and in-depth input from the customers.

4: Recognize employees’ fear of being replaced. When employees perceive that digital transformation could threaten their jobs, they may consciously or unconsciously resist the changes. If the digital transformation then turns out to be ineffective, management will eventually abandon the effort, and their jobs will be saved (or so the thinking goes). It is critical for leaders to recognize those fears and to emphasize that the digital transformation process is an opportunity for employees to upgrade their expertise to suit the marketplace of the future.

5: Bring Silicon Valley start-up culture inside. Silicon Valley start-ups are known for their agile decision making, rapid prototyping, and flat structures. The process of digital transformation is inherently uncertain: changes need to be made provisionally and then adjusted; decisions need to be made quickly, and groups from all over the organization need to get involved. As a result, traditional hierarchies get in the way. It’s best to adopt a flat organizational structure that’s kept somewhat separate from the organization’s rest.